(Bloomberg) -- Copper plunged below $7,500 a ton as fears of a global economic slowdown piled pressure on industrial metals and deepened their retreat from record highs just months ago.
Investors are fretting over a range of threats to demand, from Europe's gas crisis to a US slowdown and renewed virus flare-ups in China. After a 4.2% slump on Tuesday to its lowest close in 19 months, copper fell almost 5% on Wednesday, before paring some losses. Aluminum, nickel and tin also tumbled.
A fresh round of mass virus testing in Shanghai underscored concerns that China's Covid Zero policy will complicate the recovery for the world's second-biggest economy. The country was seen as one of the brighter spots for demand, given government pledges to reboot growth this half.
“Copper's caught a bit of a bid that's lifted it off the lows, but we're certainly expecting more downside,” Geordie Wilkes, head of research at Sucden Financial Ltd., said by phone from London. “We're not in a recession yet but we're certainly seeing slower growth, and so there aren't any real prospects for copper to rally meaningfully from here.”
The last quarter was the worst for metals since the financial crisis in 2008, and July has brought little relief as fears of a recession dominate markets. It's a rapid turnaround from March, when the LMEX Index of six metals soared to an all-time high amid fears that Russia's attack on Ukraine would fuel shortages.
Minutes from the Federal Reserve's last meeting are due later Wednesday for more clues on the bank's thinking about monetary tightening, ahead of another rate decision in late July. The chances of a US economic contraction are now 38%, according to the latest forecasts from Bloomberg Economics.
“There is no bullish news at the moment, really,” Fan Rui, an analyst with Guoyuan Futures Co. said by phone. “Europe, US are facing risks of recessions and can hardly contain inflation, which will lead to monetary tightening that is bearish for copper, while in China, the economy is facing a double blow from the flare-up of new cases and a weaker-than-expected demand recovery.”
Copper fell as much as 4.9% to $7,291.50 a ton on the London Metal Exchange, the lowest since November 2020, before trading at $7,552 a ton by 12:43 p.m local time. Aluminum dropped 0.7% and nickel was down 2.2%. Lead climbed 1.9%.
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